Lipid rafts are membrane microdomains present in an ordered phase. These are rich in sphingolipids and cholesterol in mammalian cells. Raft lipids do not mix uniformly with other lipids in the plasma membranes of eukaryotic cells, but instead co-exist with them as separate domains. A variety of proteins can partition into rafts. Recent evidence shows that many proteins important in signal transduction events assocaite with rafts, and that this association can be essential for their function. Caveolae are a specific subclass of lipid raft. Caveolae are a specific subclass of lipid raft. Here, the specialized raft lipid mixture is concentrated in defined plasma membrane pits, of about 50-100 nm in diameter. Caveolae are surrounded by a protein coat, of which the protein caveolin-1 is an important component. There are three caveolin proteins in mammalian cells: caveolins-1, -2, and -3. Caveolins 1 and 2 are usually co-expressed, while caveolin-3 is restricted to muscle cells. Caveolin-2, when expressed in the absence of caveolin-1, is not transported to the cell surface, and can not make caveolae. However, caveolins 1 and 2 together can form functional caveolae. We will examine purified caveolin-1 and artificial caveolin-1 peptides in model membranes, to determine how caveolin-1 interacts with membranes and with rafts, and how it binds tightly to membrane cholesterol, an important raft lipid. We will also examine the role of caveolae in endocytosis, or internalization of proteins and lipids from the plasma membrane into the cell interior, and determine why cholesterol is required for this process. We will also determine how caveolae may play a role in regulating signal transduction processes. Remarkably, levels of caveolin-1 protein decline in cancer cells. As caveolae require caveolin-1 to form, caveolae generally disappear from these cells as well. This points to an important function of caveolae in cellular defenses against cancer. This role cannot be essential, as mice that are completely deficient for caveolin-1, and have no caveolae, are not particularly susceptible to tumors. Nevertheless, caveolae are likely to play an important back-up role in regulating cellular signal transduction processes, which can lead to cancer when regulation breaks down.